RIL 3.0: Made-in-india 5G, affordable smartphones

Delay in striking a deal with Saudi Aramco disappoints investors

Reliance Industries (RIL) held its first virtual annual general meeting on its in-house Jiomeet platform and broadcast it across social media including Facebook, Twitter and Youtube on Wednesday. The 43rd AGM, drawing in 310,000 shareholders from more than 460 cities in 41 countries, captured promoter Mukesh Ambani’s ambition to turn RIL into a technology powerhouse, with zero net carbon footprint, in the next decade. If its consumer-facing businesses such as retail and Jio made the company transition to RIL2.0, now it’s time for 3.0, analysts said.

However, the delay in striking a deal with Saudi Aramco was seen as a setback, with RIL shares ending 3.9 per cent lower on the NSE. The chairman and managing director of RIL said, “Due to unforeseen circumstances in the energy market and the Covid19 situation, the deal has not progressed as per the original timeline. Our equity requirements have already been met.” Investments made in Jio Platforms and RIL’S rights issue helped raise the required funds instead. In the previous AGM, Ambani had informed shareholders about Saudi Aramco’s intent to acquire 20 per cent stake in RIL’S oil to chemicals (O2C) business. “Nevertheless, we at Reliance value our over two-decade long relationship and are committed to a long-term partnership.”. RIL will approach the National Company Law Tribunal with a proposal to spin off the O2C business into a separate subsidiary to facilitate this partnership opportunity and complete this process by early 2021.

But on Wednesday, the focus was technology. In the next three years, Jio will connect half a billion mobile customers, a billion smart sensors and 50 million home and business establishments, Ambani told shareholders in the extraordinary pandemic backdrop.

“As a technology and consumer company, RIL has built three hyper-growth engines,” he said. Retail new commerce business, oil to chemicals and Jio Platforms are the three businesses that Ambani looks to build RIL’S future on.

Giving a sense of the cutting edge technology from the RIL stable, Ambani said homegrown 5G solutions would be available for trials as soon as spectrum was given out. It could be ready for field deployment next year. Earlier this month, the group had launched Jiomeet, the country’s first cloudbased video conferencing app, to rival the global major Zoom, in yet another sign of the scale of its tech aspirations.

As part of its partnership with Google, Jio also looks to build an Android-based smartphone operating system. Other plans include exporting 5G solutions.

The company's consumer business contributes about 35 per cent to its overall earnings before interest, taxation, depreciation and amortisation. During Covid, while Jio Platforms' business improved, RIL'S oil business took a hit. "Jio has become the digital lifeline for Indians. Despite the huge surge in data traffic, Jio's network has held firm," Ambani said. This is in contrast to its hydrocarbon business where the group decided to enforce pay cuts in April due to the adverse impact of the pandemic on fuel demand.

Not surprisingly, Ambani wants to replicate the Jio Platform model, which has over 20 start up partners, for his energy business. RIL is looking to transform its energy business into a platform company, with a large coalition of global financial investors, reputed technology partners, and start-ups working on futuristic solutions.

With a target to be zero net carbon by 2035, RIL looks to build a new energy and new material company. “While Reliance will remain a user of crude oil and natural gas, we are committed to embracing new technologies to convert our carbon-dioxide into useful products and chemicals,” Ambani said. Ambani’s technology bet so far has also helped the firm meet its net zero debt target.

The latest Google investment has taken the strategic and financial investors commitment to Jio Platforms to a total of ~1.52 trillion in the last few months. These investments in turn have also put RIL on a stronger foothold, in terms of debt.

RIL, so far, has raised a total of ~2.13 trillion through the combined investments in Jio Platforms, rights issue, and investment by BP. “This capital raise is significantly in excess of our net debt of ~1.61 trillion at the end of FY20. Reliance is now truly a zero net debt company, well ahead of my goal of March 2021,” he told shareholders. Ambani said RIL'S target for capital raise is now complete, adding: "We now look forward to only adding strategic partners who share our vision in each of our current and future businesses." It's also planning to tap the debt market for future growth options. “On the back of our robust balance sheet, and taking advantage of the favourable conditions in global debt markets, we shall confidently pursue all future growth opportunities across our businesses,” Ambani told shareholders.